Robert Reich's Supercapitalism (book review)

I was inspired to read Robert B. Reich's latest book Supercapitalism: The Transformation of Business, Democracy, and Everyday Life after seeing him numerous times on shows such as The Rachel Maddow Show and Countdown with Keith Olbermann this past month or so. His insights on economic issues are invaluable and usually spot on. I have long admired Reich, who was one of the few genuinely liberal voices in the more moderate Clinton Administration, and perhaps the best, most effective Secretary of Labor in the post World War II era.

In Reich's latest book (though not really "new" as it has been out for a little over a year) he analyzes the origins of our highly competitve and globalized economy and its consequences for us as consumers, investors, and citizens. According to Reich, technological changes in the late 1960s and early 1970s transformed our economy from one that was dominated by large oligopolistic corporations producing goods in large volume at relatively low per-unit costs (raking in the benefits of economies of scale), free from foreign competition and having the ability to work with industry-wide labor unions to offer high wages and benefits. Companies were relatively "good" to their employees because they could more or less afford to be. Increased competition called for MASSIVE cost cutting. The shift in technology (technological improvements made possible by massive research & development investments during the Cold War era) made our "democratic capitalism" much more competitive and globalized. These improved technologies not only eroded this social-economic structure (Reich aptly calls it the "Not Quite Golden Age"), it also paved the way for investors to aggregate their savings in giant mutual funds and demand higher returns on their investments. So not only were the firms that were subject to foreign competition affected with cutting costs, but companies (mostly service-sector) that were thought to be exempt from foreign competition now faced demands to lower costs and maintain a lofty bottom line. As Reich flatly states in a somewhat understated fashion: "Power shifted to consumers and investors. Supercapitalism replaced democratic capitalism."

Now there is MUCH to agree with Reich as far as how the economy shifted in the early 1970s to where we are today, but I do have a minor quibble with his analysis: He seems to REVERSE cause and effect. He seems to exempt politcal factors (or believes that political changes came AFTER the technological ones) in the economic transformations that have led to increased inequality, damaging deregulations, union busting/suppression, environmental degradation, etc. Reich lets WAY TOO MANY people off the hook, namely the people who funded the right-wing think tanks that peddled deregulation and tax cuts, anti-unionism, privatization, and other free martket fundamentalisms in the 1970s and other aspects of what we now refer to as the "right-wing noise machine". This is a huge political aspect that I feel is largely underplayed (if not outright dismissed) by Reich. Even if technological change was the sole factor in transforming our economy, there is still a POLITICAL angle that needs to be acknowledged. I mean WHO decides what technologies will be pursued or how they are implemented. Will technology benefit workers, make their jobs safe, increase their productivity and allow them to enjoy the fruits of any productivity increases or will technology lead to increased inequality, stagnant wages, speed-ups on the line, "big brother"-esque monitoring of employees down to the very number of keystrokes, outsourcing, etc. The answers to these questions are largely POLITICAL ones, and it should come as no surprise as to who really holds political power and what direction technology has led us.

It is undoubtedly true, as Reich asserts, that we as consumers and investors are reaping the benefits of the highly competitive supercapitalism via lower prices and higher returns on investments. It is also true that we as CITIZENS have NOT benefitted as well as our democratic republic is overwhelmed by the not so coincidential rise in corporate lobbyists and the seemingly ubiquitous influence of money on our demcratic process. This is another area where I have a quibble with Reich. Reich claims that the increased influence of lobbyists and corporate donations are more or less a simple question of corporations that are under huge competitive stress trying to gain a "competitive advantage" against other corporations experiencing similar pressures of competition. Although this is correct in and of itself, it is not the ONLY reason. It should be viewed as no small coincidence that corporate power has risen at the expense or NEARLY EVERYTHING ELSE, not just against OTHER corporations. There is a sort of "childlike innocence" by Reich in the chapter describing the awesome corporate influence over our government. Someone like Reich might believe this power to be a relatively benign force used to gain competitive advantage in order to get their customers lower prices and their shareholders better returns, but someone of a more Institutionalist or Marxian bent might see this confluence of corporate and political power and say "No SH#T, Sherlock!!!".

Of course, even if Reich's analysis is a little lacking on the political aspects, he is a solid liberal who, in spite of my criticisms, is in NO WAY justifying any of these negative consequences of increased competition, and is in fact troubled by them. His solution, when all is said and done, is a simple one (and quite correct): "Genuine reform will occur only if and when most citizens demand it". One of the strongest portions of the book is pointing out how our politics are diverted towards the uttlery bogus, useless, public-relations propaganda of "corporate social responsibility" and how this has served as a POOR substitute for a genuine democratic process. According to Reich, it is in our democratic sphere where these issues should be hammered out, a democratic sphere run by REAL citizens and free from "anthropomorphic" corporations. It is in our democratic process where the "true costs" of supercapitalism that aren't relected in the marketplace can be dealt with.

Despite my criticisms (after all, I am just a lowly economics grad school dropout with some extra time on my hands), this is a fine book that describes the massive transformation of our economy and its consequences. Unlike most of the economics profession, he recognizes that there are problems that go beyond more tax cuts and more deregulation. We ignore Reich at our own peril. This is a must read, even if it is flawed, for anyone of a left of center politcal bent interested in political and economic issues.

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Reich in the hot seat currently

He said some of the most stupid stuff before a Congressional hearing recently.

and the anti-affirmative action groups jumping all over this...

So, beyond the obvious (and I think we all know what he was trying to say instead of what he did say), he also has the demographics completely wrong!

Construction isn't dominated by white males, it's dominated by illegal labor. Engineering, R&D is not dominated by US citizens, increasingly it's dominated by guest workers. U.S. domestic diversity numbers in STEM is beyond disgust low. Women STEM are dropping out (and I think this implies forced out) of STEM to the tune of 52%.

The rules of diversity, meritocracy from the 1960's, hey laudable goals but when someone doesn't have their demographics current or understand what is happening in the United States and it is a discrimination against U.S. citizens for jobs in their own country and that's due to global labor arbitrage, offshore outsourcing/insourcing/cheap labor....where this is a by-product...

....I mean really! It's like he has some image of a construction site in the 1960's where it was "white male"
but it was also....heavily unionized....it's like he never even drove by a downtown street corner watching the illegal day labor round ups for construction!

There is also something kind of sad in this video. Does he think Black males cannot do construction or women? Does he think women cannot do research, science or black males?

How about older workers? Are they just exempt now from discrimination laws even though age discrimination is so rampant in the United States it's institutionalized (which is horrific!).

I agree with what you are saying, a book which throws up ones hands as if all of the policy and legislation did not cause our current malaise and somehow it's just technology that is some sort of force beyond reason is also stuck in some antiquated model (Productivity model to be exact) where global labor arbitrage, different economies, differing PPP are just ignored.

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Agreed, Mr. Oak. It was

Agreed, Mr. Oak. It was very disturbing to me to see a recent Secretary of Labor betray such an astonishing ignorance about our current labor market, while complacently advancing policy suggestions based on that ignorance. Sometimes the veil drops on just how out of touch these people are.

(Btw guys, I am of sound mind and body, understand case, and have no known reading or typing disabilties, but your captcha is ridiculous. Most of the times I've tried to comment here I've had to throw up my hands in defeat. This is effort #7 for this try - let's see if can figure out what I'm supposed to copy.)

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statistics

I believe the BLS , U.S. census does not collect more relevant demographics. For example, national origin, guest worker status (they count guest workers in the unemployment stats), illegal status (huge underground economy, day labor, etc.)

On the CAPTCHA, yes it sucks but it is one of the best spam defenses.

To bypass CAPTCHA see upper right hand corner, create an account and all freaky letters go away and you don't have to deal with it.

The site is being worked on for a major upgrade. Many sites do not allow anonymous comments due to security/spam problems. I think that's ridiculous for many people just want to comment on one thing they saw but I'll note your complaint in the upgrade notes.

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I am confused now....

....is Reich a member of the slave owner's propaganda machine as I have long believed?

Or is he a 'Hero of the Underclass'?

Maybe he's just brain damaged as happens all too often in D.C.

The clips I've seen of him talking do not show someone who 'gets it...'

Will have to start paying more attention.

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'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'

The verdict is in....

... after viewing this clip I submit that Reich is an idiot totally out of touch with reality.

I am in construction, have been for 35 years, and there is NO work. NONE...nadda...bupkis....

And the street corners near every building supply are filled with literally hundreds of our Hispanic brethren who will work for $10.00 and hour as compared to what a skilled worker, OF WHATEVER COLOR, should get.

Well you get the picture.

And it's been this way for years.....

Now what the ReichIdiot is saying may be true, folks making no money should get help, but he is saying it the wrong way. The Rethugs love this kind of Dem stupidity and misstatement.

I think he should go....

....and soon.

America doesn't need someone as just plain dumb as this guy is about the social realities.

It ain't 1965 no more Mr. Reich.

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'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'

eh, pobody's nerfect

is my take. I think I know what he was trying to say and yes I agree, this tape is outrageous and he royally screwed the pooch and is probably significantly out of touch. But I also think he got Obama fever during the primary and there too abandoned objective policy analysis.

I think he was trying to point out there is serious economic injustice in this country....which is true and he was trying to say distribution of projects to address that might be in order...although I think pickin some special interest groups is a mistake because the people who need the most help do not have well paid lobbyist to scream and shout for them in D.C....most notable the entire U.S. middle class.

On the other hand, his talks on income/wealth inequality and other things are well cited, thought out...

So, I think he should realize his error on this one and get economically serious but not throw out the baby with the bathwater.

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I hear you...

...but when will the folks on the Obama team take to the public square and start telling it like it is in a comprehensive and understandable way?

The public's perception is being warped by the Republican lies on the CBO report, bloviating about the deficit, being 'locked out of the process...' and what do we get from the Obama team?

This sort of garbled message but mostly...

(((((((((((((((((((((crickets)))))))))))))))))))

It doesn't take more than a week or so of uncontested lies from the MSM and the 'conservative' bloviation machine and all of a sudden....

....Dems are amending the package to be more 'bi-partisan'. The truly weird thing is that most, not all, but most online commentators, and McClatchy are all over this sort of thing.

The public? Maybe not.

Reich is a smart guy but he is part of the problem. See his stint with the 'Masters of the Universe'. I am more than willing to give any member of the Obama admin the benefit of the doubt despite my opposition to his candidacy but...

...they gotta do better than this. Just being '...not Bush...' is not going to be enough.

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'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'

that's driving me nuts

I just kind of wrote an opinion piece (speckled with tax analysis) on the non-debate debate.

Yes, both sides are driving me nuts because this should be a very careful analysis, each component should have a "jobs created" and "when created" by each section and none of this 'oh 1% spending = 1% GDP growth' stuff.
I don't think that is quite valid because they passed the last "Stimulus" with those exact assumptions and obviously GDP contracted 5.5%. Now I don't know if the economy would have contracted more or not...but I find it too odious, to "theoretical" to general to spend so much damn money where just the interest is more than the tax cuts and we're running the biggest deficit in the entire history of the United States.

But yeah, both parties with this fictional non issue dance or policy absurdity just drives me nuts.

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About two years ago,

Paul Krugman (I'm pretty sure it was Krugman) wrote a short article in which he confessed that he used to dismiss such political considerations as lams712 correctly notes that Reich ignores. But, Krugman continued, the evidence that economic rewards were going, not just overwhelmingly, but almost entirely, to just the top one percent (actually, according to other studies, the top one tenth of one percent, or about, if I recall correctly, 17,000 households) had forced him to question economic conventional wisdom, and begin to examine political actions for their economic impact. If anyone remembers that Krugman column, and can provide a link, I would appreciate it. I tried to find it a few months ago, without success.

But what I really want to do here is ask lams712 to read a different article on what's changed since the 1960s, and report back here how it compares to Reich's book. Because it seems to me - based only on lams712's review here - that Reich is ignoring what I consider one of the most important detrimental economic developments of the past half century, financialization.

I am referring to the work of I would you to the work of Dr. James Crotty, of the University of Massachusetts, Amherst, who has written about the effects of neo-liberal economics on non-financial companies, as well as increased competition. Generally, what Crotty is addressing is the rise and entrenchment of economic neo-liberalism.

The Effects of Increased Product Market Competition and Changes in
Financial Markets on the Performance of Nonfinancial Corporations in the Neoliberal Era

There has been a dramatic shift that began slowly in the 1960s go-go years of multi-national conglomeritization, and greatly accelerated in the late 1970s beginnings of leveraged buy-out banditry, that has completely replaced the conception of actual industrial management with what Crotty calls a “financial portfolio” conception of industrial assets. We have now raised, trained, and succored (nay, richly rewarded) three generations of financiers and corporate managers who no longer have “the Chandlerian view” of an industrial enterprise as “an integrated, coherent combination of relatively illiquid real assets” that require long-term development and management of relations with employees, vendors, customers, and community to be successful. Rather, they view an industrial enterprise “as a ‘portfolio’ of liquid subunits that home-office management must continually restructure to maximize the stock price at every point in time.”

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Johnny Venom, read this

If you're going to continue with the notable & quotable series, I suggest Tony's 2 comments today be candidates.

Economic justice, or basing distribution to ensure that all segments of U.S. citizens get equal opportunity is one of Jim Webbs ideas (he has been oh so blasted on oh so much on this). I think he has a strong point for if a particular ethnicity/age/sex is being discriminated against, it will show up in the $$$, in opportunity as well (say college graduation rates or getting in - which getting into college these days for all Americans is looking like something out of the Survivor TV show).

Case in point women's wages are still way beyond white male, blacks overall median income still way below....but by doing it through economic fairness I think it will take into account better some of these problems, esp. when segment demographics are not static.

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Thanks for the link....

...I'm sorry it took me a while to read it. I actually think that Crotty and Reich are talking about basically the same thing. Reich mentions deregulation of financial markets going back to the 1960s and how this has forced companies (mostly in the service sector) to ALSO cut payrolls, reduce benefits, etc.---not because the are subject to foreign competition, but because (as what Crotty refers to as the neoliberal paradox) these companies were under pressure from Wall Streeters to maintain ever-increasing bottom lines (which led many corporations to stop thinking long term and thinking on a quarter by quarter basis) or else they faced the risk of falling stock prices or threat of hostile takeover.  I double checked the end notes of Reich's book because it looks like Reich could have used Crotty as a source, but he didn't. Where Crotty seems to think of financial deregulation along a neoliberal bent as the primary mover I think Reich would say something like:

technological changes (which transformed our oligopolized, protected from foriegn competition economy) led to----> deregulation of nearly everything (including financial markets) which both led to---> globalization, outsourcing, union busting, payroll & benefit slashing, ULTRAHIGH CEO pay, undermining of democracy by corporate interests, etc. (or the MESS we are in today).

I think politics were behind this whole thing which I don't think Reich acknowledges adequately. I guess the difference between Crotty and Reich are whether financial deregulation is the primary cause or not, but reading Crotty's paper I thought there was alot of overlap.

 

 

"....under Capitalism, man exploits man. Under Communism it's just the opposite..." ---John Kenneth Galbraith

 

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"....under Capitalism, man exploits man. Under Communism it's just the opposite..."

---John Kenneth Galbraith

he has a good stimulus hiring suggestion here tho --

The Stimulus: How to Create Jobs Without Them All Going to Skilled Professionals and White Male Construction Workers -- http://robertreich.blogspot.com/2009/01/stimulus-how-to-create-jobs-with...

"... all contracts entered into with stimulus funds require contractors to provide at least 20 percent of jobs to the long-term unemployed and to people withincomes at or below 200 percent of the federal poverty level. And at least 2 percent of project funds should be allocated to such training. ..."

of course, it'll never happen in a million years, sadly.

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Reich, Krugman, and other Keynes mental cases

What I love about all these so-called economic experts like Robert Reich (does anyone remember the last time he was right about anything?) and Paul Krugman (dito) is that somehow they still believe in the old discredited Keynesian theory, which has been destroyed by actual output and results. They honestly believe that by raising taxes and regulating (i.e. big business people get appointed to the regulatory boards and create rules that help them and keep competitors out of their way) business is the way to economic prosperity. Zimbabwe, the Soviet Union, need I remind you of the 70s, and everyone else who have tried what these men believe in have failed. Now we are doing the same thing, we increase spending and get nothing out of it, we push cheap money which hurts the poor, and we grow the size of government, all the while we decide to punish the people who we blackmailed in the first place, telling them to make loans that any sane person wouldn't (it is very well documented) and we afford them cheap credit and money. Government and economic policies such as the ones Reich and Krugman, and their discredited god, John M. Keynes; have always led to bigger deficits, economic stagnation, class warfare, devaluing of currency, and the selling out of the one economic system that has worked time and again when allowed to: CAPITALISM.

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you are an idiot

frankly. Firstly Keynes was not involved AT ALL in communist USSR and it's implosion or Zimbabwe and from those statements, it's pretty clear you do not even know what the actual theory states.

Secondly, we are not enacting Keynes economics. Unfortunately more people who do not understand Keynes claim that but by the theory, that is not what is happening.

Now if you want to talk about corporate favoritism and corruption...oh yeah, that's unfettered capitalism isn't it? Oops...

God, when will a real reporter get on FAUX news and get idiot Glenn Beck off the air. You might consider listening to a pundit who at least has a BS in economics to get a real clue here.

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Reich is not an economist.

Reich is not an economist. Why anyone would think to listen to him about economics is beyond me.

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